Where can metro Detroit's millennials find affordable housing?

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"Missing middle" housing in Dearborn.David Lewinski.

We've all heard ad nauseam that millennials' housing preferences skew strongly towards renting over buying, but multiple recentanalyses show that America's 20- and 30-somethings are finally starting to plot a delayed foray into homeownership.
However, the deck may be stacked against them in a way not seen in their parents' generations. Millennials' earnings are either significantly low, or stagnant, compared to their notably less-educated parents. And here in metro Detroit, they face a projected lack of affordable rental housing even as home prices continue to soar.

But the news isn't all discouraging. Some local government officials and developers have taken steps to improve affordable options for young metro Detroiters – and they're continuing a conversation about how to create more. We talked with several of them about where affordable options can be found now and how to continue addressing our area's need for more.

Affordable communities

So which metro-area communities actually offer affordable options right now? A heat map maintained by the online real estate listing hub Trulia shows a well-defined ring of lower-priced homes and rentals surrounding inner-ring Detroit suburbs like Dearborn, Warren, Southfield, Livonia, and Eastpointe. Pontiac is also still a lower-priced zone, but prices otherwise rise steadily as you move into the outer-ring suburbs.

"I think there are a lot of communities that are reasonably affordable for millennials starting out or other households on a limited budget," says Richard Murphy, program coordinator for the Michigan Municipal League and local urban planning expert.

Murphy notes that for many millennials, the concept of housing affordability goes beyond the sticker price of the housing itself. Widely noted for their disinterest in car ownership, millennials are also concerned about how transportation costs might add up in their new neighborhood – and Murphy says that in many areas of metro Detroit, those costs are significant.

"Folks might be spending 25 percent of their income on housing and also 25 percent of their income on transportation," he says. "So it really is a cost that should be considered when picking a place to live."

Here again, the inner-ring suburbs have the edge. The Center for Neighborhood Technology's Housing and Transportation Affordability Index, which calculates and maps housing and transportation costs nationwide, shows lower costs in both categories for that band of communities surrounding Detroit. Murphy notes that communities like Ferndale, which have made efforts to emphasize biking and walking in addition to convenient mass transit access, are particularly appealing in this way.

Still, many millennials may not consider some of these statistically cost-effective areas particularly affordable. Caitlin Martin, a realtor at Royal Oak-based Red Door Realty, says budget is a big issue for her millennial clients – and many suburbs, even the inner-ring ones, are tough on their budgets.

Caitlin Martin. Photo by David Lewinski.

"Right now, it's just smaller pockets of affordability," Martin says.

What's more, the affordable housing that is available may not be the type many millennials are looking for. Housing throughout the metro area skews strongly toward single-family detached homes – 86 percent, to be exact, according to a recent report on metro-area housing from the Urban Institute.

Shannon Morgan, senior vice president of development company HRS Communities, says some millennials have aged out of rentals, but they're seeking "missing middle" housing – duplexes, townhomes, condos, and other housing types that are smaller, lower-maintenance, and less expensive than detached homes.

"They're thinking about for-sale product at much lower levels than our demographics have done in the past, so you have to look at what our product mix is," Morgan says. "I think that's a big challenge for our suburbs."

Affordability innovators

However, forward-thinkers in multiple local communities are moving to address this affordability pinch. In one recent example, Ferndale adopted a new policy requiring that all new developments utilizing city-owned land or city tax incentives reserve 25 percent of their units for affordable housing. Ferndale city council member Melanie Piana says the policy was prompted by the rise of mixed-use developments that offered only market-rate housing in the city.

"This was an opportunity to say, 'Hey, as a variety of housing options come into the community, let's make sure that people ... can stay in Ferndale, the community that they love, or start anew here,'" Piana says.

Some municipalities are actively working to incentivize affordable development and to diversify their housing mix. Dearborn economic and community development director Barry Murray points to the City Hall Artspace Lofts, which uses federal low-income housing tax credits (LIHTC) to offer affordable units for artists. Murray describes the project as a way to combat the typical pattern of artists moving into a community and then getting priced out of it by gentrification.

LIHTC is available to housing developments for those making up to 60 percent of the area median income (AMI), but Murray says Dearborn is also looking into workforce housing incentives available through the Michigan State Housing Development Authority. Those would allow for the creation of affordable units for residents making up to 110 or 120 percent of the AMI as the city seeks to attract more missing middle housing development to its downtowns.

Barry Murray. Photo by David Lewinski.

"If we can reach up to 110 or 120 percent, then we start to touch some of the Ford people, some of the Beaumont (Hospital) people, some of the young professionals who might not otherwise have the opportunity to be in some of these incentivized projects," Murray says.

Although inner-ring suburbs may be where it's at for affordability right now, some outer-ring suburbs are thinking creatively about how to offer affordable options to younger residents as well. Morgan says "secondary suburban neighborhoods" like Wixom and Fenton are "really growing in opportunity," with many working to attract missing middle development to their downtowns.

Mike Hart, Fenton's assistant city manager and director of economic development, says developing a "very good cross-section of housing types" is crucial for his community. Fenton has added some mixed-usedevelopments in recent years, but Hart says the city has even had preliminary discussions about legal options for tiny houses.

"Having cost-effective, right-sized housing within the downtown area is something we're working on to have as many options as we can reasonably provide," he says.

Developers and municipalities agree that broad, innovative vision will be necessary to continue maintaining and developing affordable housing for young metro-area residents – especially because many boomers are seeking the same already-scarce missing middle options.

Melanie Piana. Photo by David Lewinski.

"All too often, as developers, we just build based on our performance on our bottom line," Morgan says. "We need to be more focused on building based on where the market is."

Piana says affordability is a big problem that will require a comprehensive, regional solution.

"Housing is not just a government thing to solve or private-sector," she says. "It's all of these – the philanthropic, private, local government, and the development community coming together and addressing these challenges in a collaborative manner."

This article is the first in an ongoing nationwide series on Housing across the many publications of Issue Media Group. As cities grow and the population as a whole becomes more urban, housing is an ever-pressing issue. Tackling the tough topics at the heart of where and how people live, IMG invites you to explore Housing in all its iterations over the next year.